Understanding Pennsylvania’s Closing Costs – Co/LAB Lending

Who Pays Closing Costs in PA

Are you in the process of buying or selling a home and you want to get some clarity around the closing costs you are going to be expected to pay?

Maybe you have been given a few estimates from different lenders, and you don’t understand why the numbers aren’t matching up

Closing costs are confusing and quoted in many different ways, which is why in this video, we are going to spend the time you need walking through and understanding what you will be paying for, who pays them and what they are.

Hey there, my name is Megan. In case you are new to our channel, we share information for homeowners, homebuyers and for the LO’s and Realtors that serve you. We would love to have you subscribe and give us feedback in the comments about any questions you have about personal finance, homeownership and the real estate market.

What are Closing Costs?

Closing Costs are the one time expenses that home buyers and home sellers pay when a home is sold.

There are three primary reasons that closing costs can appear very different when you are looking at estimates you receive from different banks and lenders

• Where you are buying & selling- state of PA vs state of FL. In Western PA where I live, certain townships impose their own additional tax.
• The type of loan type you decide to get- conventional loans, Govt loans, investment & 2nd home loans.
• The value of the home you are purchasing or the home’s purchase price.
• The lender you are getting estimates from can be following different rules.

Here is a website you can use –
https://www.forbes.com/advisor/mortgages/home-closing-costs-by-state/
https://www.businessinsider.com/personal-finance/average-closing-costs

Let’s head over and look at an estimate, so you can see the numbers and sections that I am going to reference during the next few minutes:

• Lender Closing Costs- (Can we put these numbers up on the screen)
• Underwriting- $1,000
• Processing- $0- $1000
• Origination Fee- many times the lender fees won’t be broken out, they will get lumped into one total that s called “Total Origination Fees”

The items you will want to look for on your estimate would be any of the following:

• Loan origination fees
• Application fee
• 3rd party fees-
• Appraisal fees- $550 to $750
• Credit report fee – $75 for a single normal report, but if you need to have additional credit information pulled or corrected, the amount can go higher. If there is more than one borrower, you can double this amount.
• Verification of employment- $50
• Realtor fee- $ 250-500
• Closing fees or Legal Fees~ These costs have to do with an attorney or title company doing due diligence on your behalf, to ensure that you are buying a home that has what is called clear title. This simply means you are buying a property with no back taxes or debt associated with it. Some of the fee names you can see in this section are:
• Title Search fee
• Title Insurance
• CPL
• Wire fee
• Closing or settlement fee
• Attorney fees
• Notary fees
• Courier fees
• Land survey

Here is a calculator that calculates the cost of City and State fees
https://facc.firstam.com/?SSID=0.3694074406390031

• City & State specific fees-
  Recording fee- this is the charge your local courthouse has to record the deed and the mortgage
  Transfer taxes- this is a tax that the state you live in imposes. For example, in Pennsylvania, the state charges a standard 2%
• Prepaids- these are the expenses that you will be paying every year when you own a home, and at the start you have to pay them ahead.
• Homeowners Insurance – first you will need to pay for a full year’s insurance policy. Then the bank will also collect a few months for the escrow account.
• Insurance premium
• Interest
• Tax prorations
• Escrow fees – is the escrow account a bank sets up to manage your property taxes you pay at closing and then with your monthly mortgage payment.

Now, I want to mention that as a mortgage specialist that looks at many quotes,, this area is a sneaky section that I see some lenders leave off their estimates. The reason they would do this is if you are not escrowing taxes and insurance, but usually you need 20% down to exclude escrow.

The other reason I have heard is that because as lenders we don’t charge these costs, they don’t quote them. Well, no matter what, you are going to need to pay for them

To summarize the costs and groups of costs that I just walked you through, the numbers can be different from 3 different lenders, even if they are for the same house because outside of the “3 lender fees” all the other fees are charged to you by other people, they are 3rd party fees and we are trying to give you an estimate of what you will be charged.

But keep in mind that if you have 2 estimates in front of you
#1 uses $1,000 for homeowner’s insurance
#2 uses $600 for insurance

It isn’t going to matter. The insurance is going to be the cost that you choose when you contact an insurance agent. The same applies for the title company or attorney you pick. One lender will never be that much more or that much less than another because their costs and the ones you need to compare are the origination charges and appraisal.

The rest will be the same no matter what loan officer you work with. The more important thing is that you work with someone who is honest and educates you on what these costs will be. You don’t want any surprises on the closing day or to be told you need $2,000 more because they left it out or under quoted.

Additional Costs

One of the costs I did not mention above that you will see if you are using a government backed mortgage loan, like an FHA loan, VA loan and USDA is the funding fee. Every government backed loan has a fixed percentage that is charged and collected by the government entity that backs the bank on these loans.

• FHA Loans– charge a single premium MIP (mortgage insurance premium) that has been 1.75% for the past 10 years. This means that if your loan amount is $100,000 after your down payment, FHA will add a fee of $1,750 that can either be paid at closing or rolled into your loan amount.
• VA Loans– VA loans have a scale that determines the funding fee a veteran pays. The amount is between
• USDA Loans– The US Department of Agriculture takes less of your money than HUD and the Veterans Administration by charging 1% on their loans.

You might be wondering why I didn’t mention a home inspection, home warranty or real estate commission. This is because home inspections are optional and not a requirement outside of your own comfort and knowledge.

If you are buying a home that is outside of the normal cookie cutter home, you could also see things like homeowners association on your estimate

In Pennsylvania, Real Estate commissions are traditionally paid for by the seller when the home closes, so a buyer should not be covering this cost unless it is clearly explained why and how much you are going to be charged.

And this is because, these costs are optional and something you pay for outside of the financing of the loan you are going to get, therefore, those costs do not go on the estimate.

Who pays for the closing costs?

This will change dramatically depending on the location again, and the terms of your sales agreement.

Buyers- If you are buying in states like NY or PA, the closing costs are going to be much higher than in states like Florida or Colorado.

When do you pay them?

You pay 95% of closing costs on the day of closing. There are a few items that can be paid outside of closing, referred to as POS. These items are:

• Appraisal
• Homeowner’s Insurance

And now let’s tackle the big elephant in the room- are these closing costs negotiable? Is there a way to get a break, a deal on these costs?

You know you have heard your friend or neighbor talk about doing this! And you want that same discount code!

1st- know that the costs we went over need to be paid, by someone. I always ask people, do you think you can call the state and get them to lower the 2% transfer tax for you?

Do you know a title company that is going to give you a reduced rate and then explain to the government regulator why they gave you a discount and not others?

Taxes – can you talk the assessment office into lowering your taxes before closing?

No- you have to think of this in terms of what you can control and change yourself

Here are the 3 ways I have seen closing costs reduced for you as a homebuyer:

• Seller Assist– aka seller concessions is when you make an offer on a home, you ask the seller to pay for a portion of your closing costs. During my 18 years helping homebuyers and sellers, 16 of them has seen seller assist used on at least 30-40% of sales contracts. Unfortunately in today’s market, asking a seller for something like this when you are up against 10 other offers, may make you lose the house. So until the housing market cools off, you will want to talk to your real estate agent about doing this.

There are some closing costs that can be rolled in the loan. (FHA VA & USDA loans)
This happens with a lot of Govt loans where there is an upfront MIP fee
Refinances allow you to roll closing costs in the loan

Lender Credits have been a tool we have used for years. Instead of asking the seller to help, you are choosing to take a slightly higher interest rate, in turn for getting money back at closing from the bank to pay for some of the costs.

Keep in mind that there are many other ways to get help paying for closing costs

Just to name a few:

• You can get a gift from a family member
• You can take a loan out against your 401K
• You can sell something

So if you have been given an estimate and the amount at the bottom says that you need some ungodly number, make sure you don’t give up and talk to another mortgage professional. The right loan officer will help guide you through the process of getting costs covered and into a loan program with a low down payment option.

Seller closing costs

For all of you sellers out there, I did not forget about you! I saved the best for last. The amount of closing costs you will pay for is much more simple when you are selling a home. The items on the closing disclosure will only be a handful, although they can add up fast. The average closing costs for a seller in PA are between 7-8% of the home’s sales price. The most common closing costs you will find on the paperwork on the closing date are the following:

• Realtor fees or Real Estate Commissions
• Transfer Taxes or transfer fee
• Loan payoff
• Real estate attorney fee

In most cases, your closing costs will come out of your sale proceeds, so if your home has increased in value or you have been paying it off for a while, you will not feel the costs as deeply as buyers do.

If you would like to learn more about how much your closing costs would be if buying or selling a home in Pennsylvania, all you need to do is click on the link in the description and someone from our team will reach out and schedule a time to talk with you. This is 100% free and no payment is required.

We also host a monthly webinar for buyers and sellers that you are welcome to check out by registering through the 2nd link in the description.

We will be there to guide, answer questions and point you in the right direction.

We hope this video gave you the insight you are looking for and that you will join us for more information on next week’s video. If you know someone who could benefit from this information, please share the video with them. Hit the subscribe and Bell to get further notifications.

Otherwise, continue to check out all the other homebuying and homeowning tips on our channel and tune in next time.